Senate Budget and Fiscal Review Subcommittee No. 1 on Education

I'm ready to go. The Senate Budget Subcommittee One on Education will come to order. I want to welcome Senator Cortese, who has been appointed to the Subcommittee since our last meeting. We appreciate him being here.

We know he's a former school board member and has been involved in education issues for many, many years, including his bus trip yesterday where everybody came up from his district for education. Senator Wilk will not be able to be here today, and I should announce that it is our goal to try to be done at 12:30.

And if we get close, that may limit or decide how much public testimony we can take. So, I will make a judgment about the length of the public testimony when we complete the different items.

Let me just begin by making a few comments, because I want to acknowledge that this is an awful budget year and it's going to require us to make some really difficult choices. And given the scale of the budget crisis, we have to put everything on the table.

And the state budget is a social safety net on which many people depend for education, for healthcare, for childcare, for social services, and more. And many California children depend on services in all categories. So, cutting one to save another is an action that none of us really want to take.

As the Senate Budget Subcommittee Chair for Education, I'm going to work with all parties to find the option that best protects classroom funding within our fiscal circumstances. A very small increase for K through 12 education, which is proposed, and we are going to discuss in this hearing, is in a budget that contains cuts across state programs.

It's actually a challenge for local districts that have labor contracts in place and are trying to keep up with inflation. And we're going to have to really look at investments and scholarships in higher education to see what we can do in these difficult circumstances.

We have had seven Budget Subcommittee hearings in Subcommittee One so far this year, and this is the first hearing after the May Revision.

And it will really cover issues, almost all of which we have aired already, but which we aired before there was the May Revision based on the current revenue situation and based on how the Governor refined the budget on those issues that we already heard.

As I mentioned, we will take public testimony after all the issues and do it as best we can. But let me just say now, even if you couldn't be here today, or if you don't get a chance to make public testimony, you are here.

We will take public testimony at the webpage of the Budget Committee, either through the webpage or in writing addressed to the address that is on that. We really value the participation of the public and want to hear even if you can't be here today to testify.

There are two parts and Part A which we are about to go to. So, I would ask the panel for Part A to make their way to the table. Part A is really about the overall funding, Proposition 98 in particular, and all the permutations of the funding.

And we have three panelists scheduled, Alex Schope from the Department of Finance, Dan Merwin from the Department of Education, Ken Capon from the Legislative Analyst Office.

But we know we have other people from the various stakeholders to add or answer more detailed questions, and so we will take opening statements in that order, starting with the Department of Finance. So welcome to the Committee.

Thank you, Mister Chair, Senator. Alex Shoap with the Department of Finance. So, the May Revision forecasts that the Proposition 98 guarantee amount for 24-25 will be $109.1 billion, for 23-24 the guarantee will be 102.6 billion, and for 22-23 the guarantee will be 97.5 billion.

In the three-year budget window, the May Revise shows a decline of about 3.5 billion compared to Governor's Budget, including decreases of about 800 million in 22-23 and 3 billion in 23-24. So, moving to the Prop. 98 accounting accrual proposal from Governor's Budget. The May Revise maintains this proposal to address the decrease in the 22-23 guarantee. The only difference is the total has increased to 8.8 billion, an increase over the amount in Governor's Budget of about 800 million.

Out year accruals now total about 1.76 billion per year, which is an increase of about 154 million over the Governor's Budget proposal. So, for the Public School System Stabilization Account, the May Revise also includes changes to the projected deposits and discretionary withdrawals from the K-14 Rainy Day Fund when compared to Governor's Budget.

So, this includes a smaller deposit in 22-23 about $272 million, then mandatory withdrawals of about 1 billion in 23-24 and 2.6 billion in 24-25, and then finally a discretionary withdrawal of about 4.8 billion in 23-24.

Because the remaining balance in the Rainy Day Fund will be about 2.6 billion at the end of the 23-24 fiscal year, School District Reserve Cap requirements would not be triggered in 24-25 and the 24-25 mandatory withdrawal will leave $0 nothing left as the balance in the Rainy Day Fund.

Finally, then, per pupil funding in 24-25 is 17,502 Prop. 98 per student and 23,878 per student when accounting for all funding sources. So, moving to average daily attendance, ADA. The percentage change in average daily attendance from 23-24 to 24-25 is expected to be 0.74%, so indicating a slight increase.

ADA continues to be a lower share of enrollment than before COVID However, updated May Revise data indicates a trend of improved attendance in the years following the pandemic. So, moving now to the Prop. 98 rebench, of course, the guarantee was rebenched to reflect the continued implementation of universal transitional kindergarten and Proposition 28.

Specifically, the guarantee was rebenched in 24-25 to include an increase of 938 million for Prop. 28. per the proposition. Finance estimates that required Arts and Music in Schools Act support in 24-25 will be about 907 million.

Then the revised universal transitional kindergarten rebench amount in 2425 is about 1.515 billion, which represents a decrease of about 300 million relative to Governor's Budget. So, the May Revise proposes several budgetary actions, including solutions to bridge the additional shortfall that has developed since the Governor's Budget.

The goal of these solutions is to maintain core programs and avoid negatively impacting school funding while of course balancing the budget and the budget year and the following year. So, the investments that I will detail below just a few of the kind of bigger investments, these are inclusive of both Governor's Budget adjustments or budget investments.

Adjustments to those investments and then, of course new May Revision investments. You'll be able to see the incremental May Revision adjustments in finance letters that were posted recently.

So, on the K to 12 side, this includes a reduction of about 1.3 billion, of which roughly 1 billion is one time for the Local Control Funding Formula, LCFF, to reflect downward growth adjustments due to declining enrollment in prior years, transitional kindergarten expansion and a 1.07% cost of living adjustment.

A new investment of roughly 395 million one-time for grants to districts to acquire electric school buses. A proposed increase for universal meals of 317.9 million, of which 118.9 million is one-time for 23-24 and 198.9 million is ongoing for both growth and COLA in 2425, and then finally an ongoing increase of roughly 89.2 million to fund a 1.07% cost of living adjustment and caseload adjustments for the various categorical programs.

And then as far as solutions on the k 12 side go, this includes savings of about 73.7 million one-time Prop. 98 General Fund for the California State Preschool program, in addition to the 445.7 million that was swept at Governor's Budget.

Pulling back 250 million in currently unallocated Inclusive Early Education Expansion Program funding to instead support the electric school bus grant investment, a discretionary withdrawal, as I mentioned previously, of roughly 4.8 billion from the Rainy Day Fund, which is, in addition to those mandatory withdrawals that I also mentioned, an additional 700 million to be recognized in 25-26 through 29-30 due to the reduced revenues attributable to 22-23 as part of the past year solution, and then additional reappropriation and reversion funding totaling 317.3 million, of which 254.7 million is to support additional funding for electric buses and 62.5 million is to support ongoing LCFF costs in 24-25.

So, moving quickly to the community colleges, some of the May Revision investments or the larger investments on that side include an ongoing increase of roughly 100.2 million to fund a 1.07% cost of living adjustment for the student-centered funding formula SCFF, an ongoing increase of roughly 28.

And I'm going to let you go here, but we have separate items on community colleges later, so keep finish your thoughts.

Okay, just give us some of the top. Finish those.

So, 28.1 million to support enrollment growth within the SCFF, ongoing increase of roughly 13.1 million to fund a 1.07% cost of living adjustment for specified categorical programs, and then a one-time investment of 227.9 million to support the cost of the SCFF in 23-24 and then the Prop. 98 solutions on the community college side include additional Rainy Day Fund withdrawals of approximately 192 million, and additional past year accounting solutions of approximately 100 million.

And then reappropriation and reversion funding of about 262.9 million. 227.9, which I mentioned is to fund the SCFF, with the remainder going towards various other programs that will be covered, of course, on the community college side. And that concludes my remarks and happy to take any questions.

Just thank you and we'll do questions after everyone. Just before we move to the Department of Education, I failed to formal, even though we're not taking official actions, I failed to formally establish a quorum. So, could you please call the roll?

[Roll call]

We have a quorum. And then let me also say, I was going to say at the beginning that we have the separate community college discussion, but our discussion on Proposition 98 will primarily take place right here so that we don't have to have that again for the community colleges when we get done.

Am I gathering you're pulling the mic over because you're just pregnant with a question?

No, I was going to tack on the General Fund adjustments in K-12, if you don't mind. My name is Chris Ferguson, Department of Finance. So just a couple, a handful, of General Fund solutions that we would note in K-12 education. One is foregoing a planned investment of 375 million in the School Facility Aid Program.

Another would be foregoing a planned investment in 2025-26 of 550 million to support the California Preschool Transitional Kindergarten Full-Day Kindergarten Facilities Grant Program. We think that conversation around that 550 million would best be had within the context of education bond discussions.

And then lastly, we do have two it's just under $50 million for school inclusivity that we would forego, as well as that grows to 100 million in 25-26 or, sorry, 26-27.

And what that would do is we would effectively stop the requirement that preschool providers serve at least a specified percentage of students with disabilities at 5%, instead of continuing progress on to seven and a half and then 10%.

Thank you very much. And now we'll move to the Department of Education.

Good morning, Mister Chair. Good morning, Mister chair. No prepared remarks from CDE today. Just happy to try and answer any. Technical questions you may have.

Okay, thank you. Then we'll move to the Legislative Analyst.

Good morning, Chair and Senator. Ken Kapphahn with the Analyst's Office. We have a handout that covers our main points.

I think the key number to focus on in this May Revision is the drop in the guarantee 3.7 billion less Proposition 98 funding over the 22-23 through 24-25 period, reflecting the deterioration in state General Fund revenue estimates, some of a small portion of which is offset by slightly higher local property tax estimates.

Turning to page two, in terms of the overall spending structure for schools, I think the simplest way to think about this May Revision is that just about everything that you saw in the Governor's January Budget is back, and it's bigger than ever.

So, this May Revision has 2.1 billion in new K-12 spending, or about 760 million more than what was in the Governor's January Budget, mainly directed toward three areas covering a slightly higher cost of living adjustment, funding higher costs for universal school meals, and funding an additional 395 million for zero-emissions school buses.

To cover that additional spending, and as well as the drop in the Proposition 98 guarantee, the primary strategy is the larger Reserve withdrawal. The Governor's Budget would have left nearly 3.9 billion in the Proposition 98 Reserve. The May Revision draws that down to zero by the end of 24-25.

Turning to page three, the budget does accrue an additional 666 million in prior year payments to schools to future budgets, does not change the actual disbursement of cash, but records them in future years instead of in the prior year. And there's also an additional 327 million in repurposed unspent funds from previous years.

So, turning to page four in our comments, I think the Chair set the stage well with the comments about the overall budget condition.

This May Revision is unfolding amidst a significant budget shortfall with baseline state tax revenues about 10.5 billion below the Governor's January Budget, and a significant part of the way the May Revision addresses that shortfall overall is to align school funding with those lower estimates of the Proposition 98 guarantee.

If you were to not do that, the state budget shortfall would be even larger and you'd face even more difficult decisions for other programs and in other areas of the state budget.

Thinking about the revenue estimates in this budget, our assessment is that they're within the reasonable or plausible range, though probably on the high side of that range. Under our best estimate, state General Fund tax revenues are 8.6 billion lower.

If that's how revenues ultimately came in, the Proposition 98 guarantee would be 3.3 billion below the May Revision level. The May Revision does retain the Proposition 98 funding maneuver. We think this proposal has the same downsides as January additional obligations on the state budget, less transparency, and new precedent for similar maneuvers like that in the future.

This is, of course, a budget of tradeoffs with downsides to every solution. But the drawbacks to that proposal seem particularly notable. Turning to page five, the May Revision also sets up a future shortfall for school programs by using 2.3 billion in one-time funds to pay for the ongoing costs of the Local Control Funding Formula.

This approach does avoid immediate reductions to school programs, but it leaves a hole in next year's budget when those funds expire. And that hole is going to be more difficult to address next year because the state won't have the same budget tools to address it.

So, most notably, the state won't have funding in the Proposition 98 Reserve, and it also won't have the same ability to pull back on one-time funds.

Because a lot of the unspent funds that we've been talking about this year will be committed over the coming year. We'd continue to recommend rejecting the new spending proposals, both the ones in January and the new ones in May, that we think they look even less affordable now in light of the lower estimates of state revenue and the Proposition 98 guarantee.

A few of those proposals might be worth considering when the fiscal picture improves, but they seem much less compelling in such a tight budget situation. Turning to page six, you still have options that would allow the state to obtain both one-time and ongoing savings.

You've heard quite a bit about that from us in previous hearings, but some of them include rescinding unallocated competitive grants, reforming categorical programs and add-ons to be less costly, and making temporary reductions to school funding that you could mitigate by giving school districts more flexibility over local reserves that are currently restricted.

Those actions would produce savings that you could use to make the state less reliant on some of the one-time the Governor and to ease future budget pressure on some of your core priorities. You could also we'll talk a little bit more about the community college issues in the next panel, and we're happy to take any questions.

Thank you very much. I want to ask the LAO a series of questions to step through the different options on Prop. 98, but I can't let Mister Ferguson's comments go without a question because you teased the issue of a bond, even though a bond isn't totally mentioned in the budget.

So is it your intent to have discussions about a bond?

Yeah, I think as we signaled in the Governor's Budget, it certainly remains our intent to engage the Legislature on what a potential education bond could look like.

And given this budget that's in front of us dropping out all facilities money, it means that the bond money from the last bond ran out roughly three years ago, and there's been bond money been put in annually in the three years since.

With you dropping out the facilities money in the proposed budget, unless there's a bond, school construction would essentially stop through state spending that way. Is that correct?

I think our current projections are that remaining funding within the program could run through the end of this fiscal year, this calendar year. I don't know that I would say that school construction would end because there are other resources that locals do use for school construction. They do use.

Oh, no. I was careful to say the state support.

Yeah, on the state support side there, it is unlikely that there would be any significant or notable resources available to support core new construction and modernization projects through the School Facilities Program.

Okay. I would just say we would look forward to those conversations about a bond, and I think it's just important to get that information out there. Then let me turn to Mister Kapphahn from the Legislative Analyst and I thought the issue of the day is Proposition 98 and what the different impacts are of the different options.

And maybe my first question is not the fairest and Finance can comment, but to start it would be what is the problem we are trying to solve for here with whatever we do on Proposition 98?

What revenue situation and things are we presented in this budget that we really have to deal with and how we take action on Proposition 98.

Yeah, we're continuing to crunch the numbers to come up with an overall budget deficit shortfall number. I think the Administration has one already. Ours, I think based on a little bit of a different methodology for calculating it, has been higher.

If we look specifically at the Proposition 98 budget, I think the way to think about it is that we're going to look over a three-year period from 22-23 through 24-25.

In January, the Proposition 98 guarantee over that period dropped 14.3 billion compared to the enacted budget last June, and it's down an additional 3.7 billion in the May Revision. So overall, the state's dealing with an $18.1 billion lower Proposition 98 guarantee. And then in addition to that, there's about 2.4 billion in new spending for schools and community colleges.

So with that kind of shortfall, the state needs 20.5 billion in K-14 solutions, assuming it's going to fund at those estimates of the Proposition 98 guarantee.

And let me just acknowledge to short circuit a lot of public testimony that there are various stakeholders that have concerns about whether the guarantee is rebenched that way, and we'll let that discussion play out. But I just want to acknowledge that.

And then we had a major hearing on the Governor's maneuver already, and while the numbers changed a little in the May Revise that structure is very clear. What happens if the Legislature does not approve the Governor's maneuver? In terms of fiscally, what would the impact be to the budget if we did not approve the maneuver?

It's going to be a little bit longer answer because a lot of it depends on what you do instead of the maneuver.

The state, I think some of the way the alternatives have been talked about this session is that, well, what if the state, instead of funding schools at the revised lower estimate of the guarantee in 22-23 instead provided or spent the same amount on them as it did back when it was estimated in the guarantee last June?

So, in 22-23 that difference is $9.8 billion. So, if you were to do that plan, fund schools at the June 22, June 23 level, in the prior year, the state overall deficit is $9.8 billion larger. So, you would need some actions to address that before you'd have a balanced budget.

That would be some combination of most likely deferrals, shifts, reductions, all of the things, for example, that were in your 17 billion early action package, you'd need $9.8 billion.

But without speculating on what the different actions would be that would be required to take. If nothing is done, there's $9 billion of solutions that have to be come up with in some way.

So, yeah, the minimum is you need 9.8 billion in solutions. An additional implication of funding that level in 22-23 is you'd have the prospect of, well, that's a higher base and it's going to feed into the calculation of the guarantee in 23-24 and 24-25.

Now we're still looking at exactly how that would affect their guarantee and when and how much higher might the guarantee be in those years if you were to provide that funding in 22-23. But at a very, at a minimum, you'd have to come up with the 9.8 billion in a.

But the thing is, if it, if you did what it took, that the 9 billion was accepted into the guarantee and whatever process, how that happens, what you're saying is in the out year, that would mean an additional amount of money that's not budgeted.

And with the Governor having presented a balanced budget for the budget year and the out year, it doesn't just have a budget year impact, it has an out-year impact. That's what you're suggesting.

Yeah, one of the challenges is that.

That was a very quick yeah.

One of the challenges is that it depends on a lot of this. The answer depends on your economic assumptions.

So, in general, the better that revenue is, the less the decisions you make in 22-23 are likely to affect the Proposition 98 guarantee in future years. The worse that revenue is, the more that your decision about 22-23 affects the calculation of the guarantee in 23-24 and beyond.

Some of it comes down to what we assume happens with revenues in the future years. And again, that's something we're still looking into, trying to develop our own outlook.

Totally know that right now. Then let me advance to the issue that there have been some suggestions that we suspend Proposition 98. Now, if there was action to suspend Proposition 98, what would it mean with regard to the 8 billion in the prior year? What is this year? What is the future year? What would a suspension mean fiscally?

So, I think the confusion about suspension is that the way it's been talked about this year is that it's paired with, it's kind of a two-part alternative package and the first part of that is providing that additional 9.8 billion to schools in 22-23.

So, having the base be 9.8 billion higher or some number around 9.8 billion. And then suspension is the second part of that, and it would be invoked so that the state would not have to immediately pay for any increases in the guarantee in the current and budget year resulting from the higher 9.8 billion in the prior year.

So, what makes it confusing is that ordinarily, when we're talking about suspension, we're thinking about it as a tool to reduce the Proposition 98 guarantee and spend less on schools to help balance the budget.

But this year it's being discussed as part of a broader package where we're actually spending 9.8 billion more on K-14 education in the prior year. And then suspension would be invoked to prevent that 9.8 billion from growing to an even larger number.

And if there is a suspension, isn't there a deficit factor related to it?

That's correct. So, you would eventually have to recognize that the effect of that 9.8 billion higher base in 22-23. But a suspension essentially allows you to delay recognizing it by not providing that funding right away, but creating this future obligation called maintenance factor to eventually ratchet up funding more in the future as revenues grow.

And so, if there is a suspension and then a deficit factor, I don't know how finance does it, but somehow that would be calculated as an out-year problem that would be reflected in some out year projection.

Yes. So, the payment of that obligation or that amount is controlled by constitutional formulas. And when that the state has that on the books, the Department of Finance does include it in their multi-year projections, as we do, and it would show up as a cost that increases the Proposition.

But there's no mandated time frame on the deficit factor, is there?

It's contingent on how well revenue is doing, how well state revenues are doing compared to the economy overall. So those formulas determine the payback schedule in some cases. If state revenues are very strong, the payback can be very large and very immediate.

If we have a weak economic environment the next couple of years, it might go a very long time before the state makes those payments.

Okay. And then let's talk about the option of doing a deferral. So, let's say that an expenditure, we can choose the number, let's say an $8 billion is recognized as a deferral. How would that work and how would that go with regard to future years and when it would come due?

I think the way to think about deferrals is that they're a one-time budget solution, sort of like reserves. So, the state, if it were to defer, say, 4 billion from 24-25 to 25-26 that's 4 billion in savings. That's kind of one alternative way of obtaining savings within the Proposition 98 budget.

But it is added as a $4 billion out year cost in a budget that is now theoretically balanced.

That's right. The downside of deferrals is that then they don't really address the ongoing mismatch between funding and cost of programs. So, if you make a deferral, the state's essentially counting on the Proposition 98 guarantee to grow the following year.

Because if it doesn't grow, then you not only need to continue the $4 billion deferral, but you have to add more deferrals on top of that just to keep treading water and break even.

With deferrals, unlike the suspension maintenance factor option, the state does a little bit more control over the amount and the timing of when they're repaid. So, in some cases, like with the recession, we very brief recession in 2020, the state created a huge amount of deferrals and paid them immediately.

On the other hand, in the early 2000s, we created a small deferral and just kept rolling over that deferral for another 12 years or so. So, it's state decides when deferrals are created, how much, and when they're finally repaid.

Okay. Now, having walked through those different options for those following at home, they could not see that the Department of Finance person was periodically nodding. So let me ask if you would have any additional comments on the way we have walked through the different options.

No, I think Ken laid that out quite well. The one piece that I think I just add contextually is as we think about deferrals, deferrals are generally spending within the guarantee package, not necessarily how the guarantee is computed. So that's probably the one piece that I add to that.

Okay, I would just make a brief comment that is sort of obvious, which is that this just lays out a whole series of options and they are all difficult. It is, every single one sort of seems to require us to pay money that is not budgeted, with the possible exception of the Governor's proposed maneuver.

But I think I want sort of an understanding that we have to figure out how to pull money from other places if we do certain things that require additional costs. And yet the constitutional issues may well be the constitutional issues, and that might be above some of our pay grade.

But we are going to have intense discussions over the next few weeks about these options, and I think it's good just to have on the record what they do. And I jumped ahead. I don't know if Senator Cortese and actually that completes my questions on this issue.

But I don't know if Senator Cortese has comments or additional questions on any piece of this. Senator Cortese?

Well, in the interest of time and playing catch up here, obviously I'm familiar with Prop. 98 and the other side of it, the school district side of budgeting.

I'm also familiar with Budget Committee here, having served for the first two years of my existence as a Senator on budget, but not taking the deep dive like we're taking today into Prop. 98 and some of the machinations that are on the table this year.

So, I'll catch up more so after today's meeting and with yourself, Mister Chair, and staff and others that are here to make sure I'm prepared to contribute fully as we get very, very close to making final decisions here. I will say that it's unclear to me with the maneuver, for lack of a better way.

I mean, it just seems to be called that everywhere we look. So, I'll refer to it that way on Prop. 98, that if you kick that over to future years and you have increased revenue, we happen to have another big IPO year or whatever and we have an increase, the Prop. 98 guarantee, the floor goes up.

And it seems to me that that doesn't necessarily create a better opportunity to repay deferrals, but complicates things even more because suddenly we have an additional commitment or a higher floor that in effect takes away from other General Fund priorities by design. And I fully support Prop. 98.

So those are the kind of questions I have. And I appreciated, you know, in the presentations, this idea that it depends. Reminds me of an old set of law school questions way back when, you know, we get into these kind of situations and there's not just a clear rule that you can apply, it depends on what happens with revenue and so forth.

So, I got that loud and clear. But I wanted to acknowledge that I need to probably play with some of those potential fact patterns. I think that's a way for me to do it, almost look forward at case studies and say, what happens if this, what happens to this, and what happens to this?

I've appreciated, Mister Chair, your insistence that we look hard at this, and I know you've been doing this for a while, including not just in Sacramento, but including back home in the district, in the Bay Area, trying to explain to people that in some sense this is a zero-sum game whichever way you do it, and therefore it's a deferral of pain, not a deferral of any kind of permanency that gets us out of pain.

I appreciate that very much, and I'll stop there for today.

Thank you. I really appreciate your comments and look forward to working with you in any way that is helpful.

And let me thank the panel, because I know this is going to be at the heart of the discussions the next few weeks, and I think I wanted to make sure everybody understood all the permutations and what's going to happen.

And I look forward to the discussions on a bond because I know the deadline for that is almost the same deadline as for the budget, and so we will have to do that. So, I appreciate that. And we will move on to Part B of the agenda.

And it is the University of California and the California State University system, and it is the base budget reductions. And we will have Chris Ferguson from the Department of Finance, Jennifer Pacella from the Legislative Analyst's Office, she have Seija Virtanen from the University of California, Cheryl Ide from the California State University system.

And we will have a discussion in that the Governor, in his January 10 budget, proposed keeping the compacts in and deferring the 5% due in the next year to the subsequent year. And there's a completely different proposal on the table now. So let's begin by going to the Department of Finance.

Yeah, Chris Ferguson with the Department of Finance. So, as it relates to issue one, the may revision proposes a couple of adjustments in the budget year for the University of California and the California State University in particular. It is a one time reduction of 125 million in 2425 and the University of California's base operations support.

And for the California State University, it would be a one time reduction of 75 million in the budget year to their base operations and support in 2526. That would be replaced with a 7.95% reduction to each of those budgets, so that 75 million, 125 million would be added back and then replaced by that 7.95% reduction.

I don't have the specific figures in front of me, but it's just under 400 million each for the University of California and the California State University starting in the 2526 fiscal year.

However, this layers on top of the Governor's Budget proposals around the deferral which is sustained in the May revision, as well as the 10% compact adjustments that would be paid in 2526 which represent the 5% from 2425 and the 5% from 2526. Our expectations around the compacts remain. In exchange for those 5% adjustments, we would expect the systems to continue making progress towards the goal of the compacts.

Jennifer Pacella Legislative Analyst Office so, as you heard finance describe, the may revision still contains the deferrals, the one time payments, but then an addition layers on these base reductions. So it has base increases and base reductions. The base reductions are rolled into a broader proposal by the Administration affecting state operations.

So we think this approach that has increases and reductions and embedding proposals within proposals is rather complicated and opaque. So we would recommend you take a more transparent, straightforward approach.

Again, given the deficit, and given the deficit is even larger now than in January, we'd suggest that the universities contain their spending, that the state not make commitments for 25-26 that it might not be able to fulfill.

So when it comes to balancing the 24-25 budget, you might decide in your budget balancing that reductions to UC and CSU in 24-25 are required. You can choose to do the levels proposed in the May revision. So you could cut UC by 125 million, reduce CSU by 75 million.

You could decide as part of your budget close out to change those amounts, to do more or less as needed to build your package. We'd note that there are a few factors that would mitigate a General Fund based reduction. Both segments are raising tuition. We've talked about that in earlier hearings. Both segments have core reserves.

Now some of those reserves are committed. The universities might need to go back and revisit some of those commitments. And then CSU is funded for approximately 17,000 students that it's not enrolling. So there's also some room to make budget adjustments in those cases when it comes to actually making the reduction.

So regardless of the size of the reduction you make, you have choices there, as well as to how you go about making it. You can take an unallocated cut to the core program.

You can focus on different sectors of their budgets, whether it's institutional support, research, student support, take more targeted cuts, or look at earmarks that have historically been embedded in the budgets and surgically remove particular line items. Any approach, you're going to have pros and cons, they're going to appear difficult.

We could help if you decide you want to pursue one approach over the other. But again, our bottom line is just to take a more straightforward and transparent approach. If you need to cut them in 24-25 decide the level, then revisit in 25-26. You'll have much better information 12 months from now as to what 25-26 looks like.

Thank you. We're making panelists life miserable by having a simultaneous hearing in the Assembly and the Senate. And so I think that's where the UC representative is that I announced and so Michael Bedard is here for UC. If you'd like to make any statement.

You'll make me go first. I am not Seija Virtanen. I am Michael Bedard. Thank you. Good morning Mister chair. On behalf of the University, we recognize the significant budget challenge being faced and the proposed reductions for the University reflect that reality.

The May revise proposes $125 million cut for the University in 24-25 and in 25-26. The proposal is to provide UC with a series of reductions and increases that once totaled, would net an increase of 2.4% or 252 million over the 23-24 budget year.

For the coming budget year, with our cuts and our expected base cost growth across the system, we would expect to see a $258.8 million gap that needs to be covered by campuses. This will impact our operations and will be painful to absorb, but there are options we're exploring, including through revenue growth and cost cutting.

So some of those options really aren't on the table much for this year since fees and other things have already been set for the coming academic year and fiscal year. And so we have some cost cutting options we're looking at, including salary programs, salary negotiations, UC retirement program contributions, and negotiating health care costs for 2425.

UC is unable to change some of the other costs that we could otherwise address. The campuses receive the state's General Fund allocation through a formula. We will intend to pass those reductions on to the campuses through the same formula. Campuses will then determine how best to implement the reductions at those locations.

The methods used in the past, we expect, will be part of the solutions again this year, including not filling positions, employment positions as they become vacant. Campuses currently have about 8% turnover in position. So what this means in terms of the real impact will be potentially longer wait times for advising appointments, for food service, for financial aid assistance, things like that.

Because there is no new funding coming for later, Inc faculty classes may be impacted, class sizes may be impacted, they may need to put off maintenance that's otherwise not absolutely critical, leading to increasing demand for deferred maintenance funding. And I'll put in a plug here for higher education included in the education facilities bond.

Campuses also may have to delay technology projects that would otherwise bring efficiencies and potentially ending new programs that have shown promise to help first gen students and students from other underrepresented groups like early summer Start programs. These cuts may be painful and students will see an impact.

However, within this challenge is also an opportunity to envision new ways of connecting with students and ensuring that the University examines educational program offerings. A great deal of uncertainty remains for the next fiscal year after that 25-26 and we're grateful that the compact funding will be a part of our 25-26 funding.

I would lastly like to request that the Committee and Governor consider some exceptions to the proposed 7.9% base budget reduction for UC. The first of these is the exclusion of bond debt payments from the 7.9% calculation, since the University cannot spend those funds on campus operations.

The second is to allow for reductions to some legislatively mandated program funds that would otherwise be kept whole while campus budgets are reduced around them. Thank you for your time.

Thank you very much. And now we'll move to the California State University system.

Good morning, Chair and Members. I'm Cheryl Ide, Deputy Director of Budget Advocacy on behalf of the California State University. We appreciate the opportunity to discuss our reaction to the May revision and its impact on the system. The deferral and cuts in the May revision present several challenges to the CSU.

Each campus is preparing and developing specific strategies to address their budgets, which may include consolidating programs, adjusting class sizes, freezing new hires, and offering voluntary separation programs, all to reduce expenses while carefully minimizing disruptions to students and staff.

Despite the preparations and reductions, the projected $345 million operating budget gap for 24-25 represents a significant financial challenge for the CSU. This gap is akin to the entire budget of CSU Bakersfield income CSU Stannis law. An example of a significant cost increase is the healthcare premiums. They have ballooned over historic increases six fold without any increases in benefit coverage.

For example, they've been $12 million annually, but they ballooned to $78 million in budget year. Unallocated cuts, while we are principally opposed to cuts, we recognize the fiscal climate in the state is currently in and appreciate the flexibility of an unallocated cut as proposed by the mayor vision.

This allows the CSU to pinpoint the reductions with the least disruption to our core mission, and we appreciate the differentiation between the segments in this cut, which recognizes the limitations and contrasts of funding between the two systems. Our enrollment is on upward trajectory, with enrollment for the current academic year up 2%, more than 7,500 students.

We also enrolled the largest freshman class in CSU's history, more than 64,000 Californians. We recognize the administration's intent to keep the compact goals intact, including enrollment growth, as this is a shared goal by all parties.

However, it does not go without acknowledging the enrollment threats that we are facing head on, such as the impacts faced by our mixed status students and the challenges to complete the FAFSA. Additionally, the need to extend the middle class scholarship deadline, which we appreciate is proposed in the May revision.

The May revision will also has a substantial reduction to the middle class scholarship, which would impact 200,000 CSU students decisions to seek higher education and any legislation that would duplicate the route to the bachelor's degree, causing competition for enrollment between the CSU and community colleges.

Despite these challenges, the CSU remains committed, too, and we will do our best with less funding to fulfill the goals outlined in the compact agreement. Also, we will continue to work with the Administration and Legislature for the speediest return to new state investments in the CSU to ensure successful outcomes for our students. Thank you again for allowing us to provide feedback, and I'm happy to take questions at the appropriate time.

Thank you very much. And let me ask UC and CSU to begin the questioning. The revenue from the stateside for the compacts is not budgeted for this year. Are you intending to continue to honor the contract compacts even though the budget money isn't there for it? And I don't know which one of you want, both of you look like you want the other one to go first.

Yes, we intend to honor the terms of the compact again, recognizing that there's a commitment and the deferral, deferred funding for next fiscal year.

Yeah, I would echo that same sentiment. We view these as shared goals amongst all parties and we intend to fulfill our part of them. And then we would just ask and recognize that if the situation were to change economically in future years, that we would be able to revisit restoring compact funding to its original levels.

And then let me ask the Department of Finance if how does the issue of deferrals work into this? I had offered the opinion when we heard busy and CISU the first time around before the May revise that I thought they were remarkably trusting that the money could be deferred and would show up in the next year.

And now turns out that's what's happening in some ways. So is it your expectation that you will meet these deferral obligations so that they're keeping with the compacts is going to work?

Yeah, it's still our expectation to meet the deferrals. We have budget trailer Bill Language to codify those payments. So yeah, certainly still fully on board. I would actually say that relative to the Governor's Budget, University systems should have additional assurances that those payments would be able to be made because our structure at the May revision is attempting to address the budget shortfalls in both 24-25 and 25-26.

And if, but you can codify something and you can uncodify it. So that is basically the best assurance you're trying to give to UCSU. Then let me ask a couple of individual questions. And to CSU, you have labor contracts. That, and the one I'm most familiar with, but I think there's two others, is with the faculty that if the base funding drops, they're not obligated for a certain increase that was negotiated in there. Is that correct?

If this holds what is proposed for the cut in base funding, does that mean you're not obligated to pay that piece of the contract that was predicated on no cuts in base funding?

So we're still reviewing it. We understand that the governor's proposal includes a one time cut, but I think that we're still trying to understand the technical implications.

Well, the contract is really clear. It's like if the base funding is cut, you're not obligated to pay that salary increase. Are you still saying you need to look at it to see if that's not the case?

We're still reviewing this. As far as it's a May proposal, we'd like to see what the Legislature has in mind and go from there before we make any kind of decision.

Obviously, you won't make a final decision until a budget is adopted, but if this budget were adopted, it seems fairly clear that they're not going to get that pay increase.

I think. I wouldn't want to opine on it at this point.

Okay. Well, I look forward to somebody opining because it's pretty clear what's in the budget there. And then let me ask both of you, and you sort of did this in your statements, but how will you compensate for the lost revenue over just the continued base funding at the current level and a 5% increase? How will you reflect that in expenditures and the budget? And let's start with CSU.

Yeah, we're still reviewing it. Obviously, this just came out on Friday, and so we were operating and planning based on what we saw in the Governor's Budget, and now seeing that we have the cuts and then as well as the deferral and the reduction in the compact funds, we haven't fully fleshed out what we're going to do. So we're still adjusting.

And I appreciate that, but we are having to make the decision, and you having review and us not knowing what it is might influence our decision if we had a clear understanding. So will you commit to, to getting us those answers, the minute you figure out what they are.

Yes, we can follow up with yourself.

Okay, thank you. Let's go to UC.

Yeah. I don't think that we have anything 100% firmed up, particularly because this funding would be funneled through to the campuses to make allocations on their own. I can speak a little bit to what, as a system, UCOP might do based on past history and things that I know that are going on.

So one of the things I mentioned is we could evaluate the amount of contributions to UC retirement plan. That would be an option. We could reevaluate other salary plans for non represented employees.

There was an announced, I think, 4% or so increase for non represented employees at the University that I think the President's language had it partially contingent on what the state budget looks like. There's a possibility of a system wide hiring freeze on campuses. Again, they could Institute hiring freezes. They could cut different departments.

They could do proportional reductions to student services and other programming like that. And then, of course, deferred maintenance. Again, plug the bond here for including higher ed. The University has many tens of billions of dollars in deferred maintenance across the system and has not been included in a facilities bond that has passed in nearly 20 years.

So we would probably continue to try and find ways to, you know, keep our facilities operational without really addressing some of the things that needed to prevent us from getting to really bad.

Yes. oh, just one quick follow up question, and then I'm going to go to Senator Cortese. I have this recollection that UC did not pay into the pension system for a number of years. Is it solvent? Is the option of not paying into the pension system something that's going to affect the solvency of the system?

That's a great question. I know that for some time there were no employee contributions, but I don't know the details of insolvency. I'd have to have..

If you'd report. Back to us because sort of saying that might be a cut. That is a very relevant fact.

So Jennifer Pacella from Leg Analyst office. So when it comes to UCRP in the nineties, there was what some folks call like a contribution holiday. There were no contributions made on the employer or employee side, is my understanding. When the stock during the Great Depression, things really turned around and so UC has had to.

Great recession. Right.

I'm sorry, what did I say? Oh, I'm sorry. Yeah.

Because I know it didn't turn around in the 1930s.

Yeah. So they have reinstituted employer and employee contribution rates. I think what might be on the table, if I'm hearing correctly, is just an adjustment to whether it's a 14% or a 16% and they have to continue.

I think that holiday went way past the 1990s of payments in, because I wasn't in the Legislature till 2002 and I know it was going in that decade. So that's neither here nor there. It still begs the question of solvency, and they're going to report back. And thank you. We appreciate your answer, Senator Cortese.

Thank you. Just on this issue of what happens with the collective bargaining triggers or provisions, what? I'm just wanting to do some active listening here and correct me if I'm not hearing this correctly, but when you talk about things like deferred maintenance being.

When you talk about deferred maintenance, you're talking about that as being a potential one time offset to meet those obligations, or was that just a completely separate thought? What I thought I was hearing is some continued...

Campuses might lobbying for further delay some projects that are not directly affecting life, health and safety.

I'm not saying I'm opposed to it. I'm just trying to get clear. Was that kind of a litany of things?

oh, yeah, a litany of things. Of things that campuses could choose from and I'm sure, say, or others in our office or on the campuses could give a better explanation of what's on the table. I'm sorry, I'm pinch hitting.

That's good enough for me. For a high level, it sounds like you have some options under consideration that might preclude the necessity of not meeting what would otherwise be the collective bargaining obligations. And just trying to make sure to.

Be clear, the University of California has not suggested we will not meet the collective bargaining obligations that we've already agreed to.

Well, but the chair did suggest that it sounded like you were responding with some potential ways to avoid that from happening.

I mentioned the non represented salary...

It just sounded like there was one place that you said that if there was a decrease, it might reflect in the salaries. Was that a misinterpretation?

The notes I have say reevaluate the salary plan for non represented employees.

Okay. I don't think it came out that way. But it's glad that.

Yeah, I may have misheard that. I thought that was part of, that was one of the ways that the University might, that UC might try to, a bucket that UC might reach into to deal with the bargain, the contractual obligations it has by going into non represented salaries where there was no commitment to make those payments if there were budgetary considerations and maybe move money over on a temporary basis. That's what I thought it was hearing.

To my knowledge, there's no, there's been no discussion, to my knowledge, of reducing any contractually agreed to salary increases. We constantly have rolling contracts, you know, with our, whatever, 17 system wide units and 15, 18.

I can understand the non represented because that's not assigned. That's right. Okay. And just for the record, CSU did do a distinctly different one where they really tied some of their salaries to the budget allocation.

Yeah, it sounded like two very different approaches. One, I'm not sure what CSU's approach is. Listening today, in terms of contingencies that might be.

Under review to try to meet collective bargaining obligations. I thought I was hearing from UC that there's some contingent possibilities for balancing those things out. If I'm conflating, then let me know.

And I thought what I was also hearing from UC is that to the extent, and I'm reading into this to the extent that the Legislature continues to move forward with the notion of a facilities bond that would include higher education, that that frees up perhaps deferred maintenance dollars that could be used to mitigate some of the impact of this year's budget.

Again, if I'm misstating your thoughts.

No. That's my understanding as well.

Helpful to know. Thank you.

Thank you. And we appreciate the complexity of this. We know that this will be a real subject of discussion going forward. And there were a few things that you're going to report back on, and we look forward to getting those reports. So thank you. We're going to move on to issue number two.

It's various Governor's May Revision proposals with UC and, and UC College of the Law in San Francisco. We have Chris Ferguson here, and I think he's going to be joined by Ian, excuse me, I know there's been some switch outs, so he's going to be joined by Jennifer from the Legislative Analyst Office.

So we'll go to the Department of Finance.

Yeah. Once again, Chris Ferguson for the Department of Finance. There are a few smaller adjustments in the University of California budget in particular that I would note. One is an ongoing reduction of $13 million in support for the UC labor centers and occupational safety and health programs.

There is an ongoing reduction of roughly 13.5 million increases slightly in the out years in support for graduate medical education. In particular, it's the Proposition 56 Graduate Medical Education Program. Over the last several years, the state had been matching those Prop 56 revenues with General Fund revenues to try and get to a $40 million level each year.

We would forego the, under the May Revision, we would forego that General Fund piece of the backfill. And then the other that I would note is a $5,000,000.01 time pullback of resources that support equal opportunity programs and professional development at the University of California.

This one-time allocation is actually from the 2021 Budget Act and is currently unused. And that's our understanding. The next two that I would note, on one time, I would note that there is a $13.7 million reduction in one-time support for the UCLA Latino Policy Center, Politics, and Policy Center.

And then there is a $5 million one-time reduction or pullback in support for the UC Davis Equine Center. Other pieces that I would note in here include the 7.95% reduction applying to the College of Law, San Francisco starting in 25-26. We estimate that's probably in the neighborhood of around $2 million ongoing to the College of the Law, San Francisco. And I'll end my comments with that.

Thank you very much. And then we'll move to the Legislative Analyst.

Jennifer Pacella again, I'm just testifying why my colleagues are in the other house. So, of all the issues before you, I think I'll just focus on three. So, as Finance set forward, there is a proposal related to graduate medical education or residency slots at UC. So, the Prop 56 program, the state doesn't have much control over it.

UC administers it via a nonprofit organization. So given the limited control, the Legislature might decide that it doesn't want to put General Fund to this purpose. It's not required to under Prop. 56, backfill for this. It could support GME in other ways that might be more direct.

If the state does reduce funding for residency slots, it's likely that statewide the number of emergency care primary care doctors that are trained in California would be reduced. It's not entirely clear right now how providers are making ends meet.

They're using some state money for these slots, a substantial amount of federal money, maybe even some local money to support residents. So, just some factors to consider. It's unclear whether providers would be able to backfill if the state did reduce funding in this area.

Regarding the one-time proposal, so May Revise does go, does pursue reverting some prior year unspent funds. We'd recommend again going even further. We think for UC, even setting aside some of the issues that we discovered were problematic over the course of the last few months, there's still something like 175 million in additional dollars that the Legislature could consider on the UC side.

Also on the CSU side, there's about 150 million if you don't look at deferred maintenance funds.

So again, we're emphasizing going after more reversion of one-time money because you might decide you want to swap it out with some of the May Revise proposals that you're less interested in, because some of the solutions before you might end up eroding and you might end up not achieving everything that was proposed, and because you might just want to protect your core ongoing programs either now or next year.

Finally turning to College of the Law, this is another instance where we think the basic May Revise approach is unnecessarily complicated. So, they propose a $2.2 million increase in 24-25 and a $2.1 million reduction in 25-26. We think it's more disruptive programmatically, just the personnel to increase funds just to reduce them.

So, we recommend holding the College of the Law's budget flat or General Fund support flat for 24-25. The other piece of this is, I think, why some folks believe there's a lack of clarity is whether it's for UC, CSU, the college of the law, lots of other state agencies that you're going to be hearing about.

The proposal on the state ops side is one aggregate amount. So, you can't actually see the 125 million for UC or see the 75 million for CSU. Or in this case, in 25-26, see the $2.1 million reduction for College of the Law. It's rolled up into a much higher-level number.

Now, that unwritten amount is connected to a control section before you. And that control section gives the Department of Finance, gives the Administration the ability to find that savings. And there isn't detail about the criteria that the Administration will use to go about finding that savings.

It isn't clear how the Legislature will be notified when savings are achieved. It won't be clear if savings aren't achieved when you would be aware of it. And there might be some instances where the solution again does erode and makes the situation for 25-26 much more difficult.

All reasons where we're recommending just take a more straightforward approach. Cut agencies if you determine you need to balance the budget in 24-25.

Okay, let me ask a couple, and thank you both. You said keep the law school flat year to year. Keep the law school flat where you take the increase for one of the years and spread it over two years. Keep it flat at a higher level.

Our recommendation is at as a starting point to keep them flat where they are in 23-24. So rather than providing them 2.5% 2 million augmentation and then taking back the augmentation in 25-26 not providing any.

Oh no, I understand what your recommendation is. I didn't understand why if there's an addition of 2.2 million, you didn't make it flat year to year and have the 2.2 million in it over two years. That's what I didn't understand. You keep it flat at the lower level and don't add at any time.

And believe me, that's budget dust in what we're tolerant. But I thought that might be something to consider. Let me ask the Department of Finance, aside from the fact that you have to make cuts to close the shortfall, what was the prioritization in deciding to just go all the way with the labor centers and a fraction of others and other things, what was the prioritization process in the cuts?

Yeah, unfortunately, I can't share, you know, that there was a specific prioritization process that I could share with you today. I think it really just focused on attempting to address the two-year budget problem before us.

Yeah, and that was my point. But what you recommended suggests a prioritization because some things are being funded and the labor centers are completely being zeroed out. So maybe there's something you can't tell us, but there was clearly a prioritization and I suspect that might be another question.

Let me just go to Senator Cortese with any questions or comments on this side.

Thank you, Mister Chair. Appreciate the question you just asked.

Just continuing along that line, when I look at, and what I'm going to say is really actually at this point, based on briefings we've received in our own caucus and as Members of the State Senate in general, not just here in the Subcommittee or relative to education, but it seems like a bit of a pattern is programs that we stood up over the last two years.

This one, UC labor centers, goes back to 2022, that there's almost a discussion in the room on your side of the table that goes something like this. Look, we wouldn't have funded this had we known that we were going to have a dramatic drop in projected, the income taxes that we were projected to have in 2024.

We wouldn't have done it. So, let's eliminate it. And that's a different kind of a pattern than a prioritization pattern that's based on something that might go like this.

Well, the UC labor centers have been absolutely instrumental in, in providing analysis for us, almost like an extended branch of administrative agency when it comes to massive infrastructure investments that we have moved out over that same period of time from 2022 through current, ranging from climate investments now to BIL match to infrastructure, the Infrastructure Act.

And, you know, to come in, I think it's confusing for people to come in and basically, you know, kneecap that program or cut that out when from a legislative prioritization standpoint, I can't speak for the whole Legislature or even the Chair for that matter, but there would be an argument that you want to try to, you know, to continue to maintain programs, even if they're external, that are designed to complement these massive investments that the state is making, which aren't going away.

What do you do if you don't have a UC labor center to come in and help us figure out whether or not workforce standards under bills like SB 150 or as applied to manufacturing, as applied to lithium, as applied to the CHIPS Act, it's UC labor center outside of the Administration itself that's providing that kind of help.

So, I think that's at the heart of the question. And I think it, with all due respect, you've been terrific today, but I think it merits a better answer than, you know, I can't really, I can't really say what the prioritization pattern is.

I think it's fair in terms of the three-way negotiation to be candid and say if it is indeed the case. No, it really isn't based on that kind of prioritization, the kind of prioritization that creates synergy.

It's based on what you said, Senator Cortese, that this looks like something that was stood up that we might have, we might not have done had we known where we were headed.

And then we can take that into account and say, well, do we want to behave that way as a Legislature or do we want to behave differently and say we're going to take a more, we're going to take a different tact and try to look at where do we get growth synergy, where do we get, where do we get a California for all coming out of even a tough budget?

And I think that's a little bit more thematic, at least on the Senate side right now Sort of a question, but obviously, that was more of a comment. If you would like to respond, please, please do.

No, I just wanted to say that I appreciate your comments and will certainly take back that concern for consideration.

Great. Thank you. And it just, as a comment, closing comment, it just seems brutal to completely cut the labor centers. And I just hope in the budget process we can find a way to deal with that. So, we are going to move to issue number three, which is the augmentation to support expanded university fee waiver.

And we have Chris Ferguson and we have Jennifer Pacella sitting in for the Legislative Analyst and then Cheryl Ide for the CSU system. And this, it really is not a significant item compared to our previous one. So, it's just important for us to air this before we. So, let's go Department of Finance.

Yeah, Chris Ferguson with the Department of Finance.

So, Chapter 695 of the statutes of 2023 authorized an expanded fee waiver for Medal of Honor recipients, children of Medal of Honor recipients, or dependents of service, injured veterans at the CSU, the UC and CCCs, that is, the University of California, the California State University, and California community colleges.

This particular May Revision investment is 5.5 million ongoing General Fund to support the costs of those fee waivers at the California State University. We did not see a similar request for ask from the University of California.

And the traditional fee waivers at California community colleges, along with the two years of free community college available to most students, negates the projected, or would negate the projected impact of this type of fee waiver at the community college system. With that, I'd conclude my remarks.

Great. Then let's go to the Legislative Analyst.

We just note, obviously, since legislation was enacted, the state budget condition has deteriorated. So, at this point, it's just a matter of your priorities to make room for the 5.5 million augmentation means you're taking from other programs that CSU is operating. So, it's just a matter of your priorities at this point.

Thank you. CSU.

Good morning again. Chery Idec with the California State University. We appreciate the administration's may revision proposals to provide ongoing support recognizing the fiscal impact of AB 1744.

This new law created new costs, and it is important for the state to follow through and provide funding to cover these new costs, and we hope to see that again in the future for any new legislation. Happy to take any questions during this time.

Thank you very much. Senator Cortese, any question or comment? And nor do I. So, we just appreciate this and appreciate what was stated about this being a decision. We move to issue number four, various May Revision proposals in the community college system.

We'll have Chris Ferguson and Jennifer Fascella on this, and David O'Brien is here to at least answer questions, if not make a comment from the community college system. So let's start with the Department of Finance.

Yes, Chris Ferguson with finance. The May provision proposes a few augmentations within the community college budget and within Proposition 98, many of which have already been covered by my colleague earlier. So I won't repeat those. I would just add that there are four demonstration projects that have been proposed.

Those 41 time investments are roughly $12 million to support a demonstration project or project or progress around e Transcript California, $12 million to support a one time demonstration project around common cloud data platforms, and then a $6,000,000.01 time demonstration project to support credit for prior learning, and a $5,000,000.01 time augmentation to support a demonstration project that would focus on educational pathways for Low income working learners.

We would say that all four of these are being funded from re appropriated monies from prior years that had become available within the community college portion of the Proposition 98 guarantee package.

Thank you very much. Then we'll go to the Legislative Analyst.

So the May revised, you know, increases the size of the funding maneuver, increases the amount of new community college spending despite the downward revisions in the guarantee, relies on an even larger amount of one time money to support ongoing college costs and uses all reserves, so increases the amount of Prop 98 reserves being used for the community colleges.

So we continue to recommend rejecting the funding maneuver, rejecting the proposed COLA, as well as all of the new discretionary spending initiatives. Again, at this time, all of those things are coming at the expense of existing program. We think this approach, again, given all of the trade offs that you're facing, still has advantages.

You avoid putting a burden on the non 98 side of the budget. You minimize the ongoing shortfall that you'll have entering 2526. We think there are one time we have identified about 600 million in addition to the May revise and unspent one time monies that you still have available were you to choose. Again, doing so has several benefits for you moving forward, including minimizing disruption to ongoing programs.

Thank you. And you're here to answer questions, correct?

Yes, sir. David O'Brien with California Community Colleges chancellor's office. Happy to answer any questions.

Thank you very much. Let me ask one of the Department of Finance, and that is that there was language to be returned for the statewide lease revenue bond for community college housing projects. And I understand you've released that language in the last 24 hours. Could you just briefly walk us through what it is?

Certainly. So we've released language within the last 24 hours. That is correct, to support a statewide lease revenue bond approach for, I believe it's 13 projects at the statewide or at local community colleges that would be supported through that statewide lease revenue bond.

The General structure is really centered around how we can meet the requirements to use a lease revenue bond structure to support those projects. It is our intent to have that language be supported ultimately by costs that are in the multi year in the community college budget right now.

So ultimately, we're hoping that all 13 of those projects will continue to move forward. The structure is designed to try and ensure that all 13 can move forward.

Okay, thank you. And then let me just ask, we're going to Senator Curtizzi, let me just ask one question of the community college chancellor's office, which is, how would you describe the impacts of suggested cuts to state operations. What would the impacts be to you?

Thank you, Senator. That is a very good question. We're in the early stages of evaluating all possible sort of ways to achieve those savings. Recognizing the very difficult position the state's in, we just feel it's important to note to the Committee and to the Legislature that a number of new educational initiatives have been passed via statute in recent years, including reforms to remedial education, oversight of full time faculty hiring funds, among many others.

The transfer process, working on streamlining, the transfer process for students transferring to the UC or CSU. All of those involve varying degrees of oversight and leadership and compliance monitoring and support for 116 campuses at the chancellor's office.

So any and all of those could be affected, as well as any of the sort of various new proposals coming through the Legislature this year if it requires some level of oversight from the chancellor's office. So we're looking into ways to achieve those savings right now.

Obviously, our last, last, last resort would be anything involving our employees or our staff. So considering everything from what can we look at in terms of our lease for our headquarters on Q Street, travel reductions, things of that nature.

Thank you very much, Senator Cortese. Any questions or comments? Okay, I would just do one final comment on this item, and that is in the local assistance re appropriation. There are just some things that have been priorities of the Legislature that are in there. So I'm grateful for that happening.

Then we'll move to issue number five, which is our same panel, and it is the nursing program support at community colleges. And let me just make a comment, which is that this is agendized because it hadn't been agendized. But when the chancellor was here, we had an extensive conversation about this.

So it hadn't been agendized, but we talked about this in a previous hearing. So let me go in the order of Department of Finance, Legislative Analyst, and if there are any comments from the community college.

College chancellor's office.

Certainly. So the Governor's Budget proposed $60 million 1 time Proposition 98 to expand nursing programs and Bachelor of Science and nursing programs to grow, educate and maintain the next generation of registered nurses through the community college system. I'll keep my remarks brief.

Thank you.

So I think at that Subcommitee hearing a month or so ago, you were, the chancellor's office shared a nursing demonstration project that was intriguing, perhaps to you. It's still unclear how that's connected to this particular $60 million pot of money. So I think you might just want to get some clarity on what is this $60 million going to be used for? During the pandemic, there was an increase in the nursing shortage.

The latest studies that have come out in the fall of 23 and winter of 24 showing that nursing enrollments are back on track and that the supply of nursing should meet demand by 2027 or 2028. So within three or four more years. Even if statewide supply and demand comes back into alignment, you might still see some regional shortages. The colleges have a few pots of money they can use to address nursing enrollments locally. So they have apportionments, they have nursing categorical money. They have strong workforce program monies.

In particular, the strong workforce program monies are for these kinds of things, like regional labor shortages. And so there is substantial strong workforce money available. Districts have not been using their entire allocations for the last several years, so we continue to recommend against the initiative. Again, were you to do it, you would have to find some offsetting savings elsewhere in your budget.

Thank you. Any comments from the community college chancellor's office?

Thank you, Senator Laird. I promise to stay seated for the entire duration of the ride, this time. On this one. I would just note that we continue to be supportive of the governor's proposal. Happy to answer any questions about our demonstration project, but I think that, you know, for us, it's an access and an equity issue. Our partners at the LAO do acknowledge that there are likely to still be regional gaps in the nursing shortage, even if this, the shortage does sort of self resolve over the next several years, which I think we have a slight difference of opinion on, but we're strongly supportive and happy to answer any questions.

Thank you. And let me just ask the Department of Finance, is this intended to be a one time? I was confused. Maybe it was clear. One time, $60 million? Or is this in a base ongoing $60 million a year.

So it's a limited term investment. So the agreement last year was $60 million for five years. So it is termed as one time investment until we would get to that total.

So it's a five year, one time investment, is that what you're saying?

I believe so, yes.

Unique. But I think we expressed our opinion in the hearing about how important this is and hope to make it work. I respect the legislative analysts as we go down the crunch here, trying to figure out how we fund everything.

So thank you. On that one, we're going to go to issue six, which is the California Student Aid Commission, and it is various proposals relating to student aid. And in this one we do have Chris Ferguson and Jennifer Pacella, but we have people from other agencies that will be here to answer questions. So let's start with the Department of Finance.

Once again, Chris Ferguson with Finance. I would note that first and primarily, the May revision does maintain and fully fund all of the projected caseload for the Cal Grant Entitlement Program. But with that, there are a series of reductions proposed in the May revision specifically to the Middle Class Scholarship Program.

The totality of the reduction is roughly 530 million, which would leave just over 100 million ongoing to support that program. We don't take the adjustment lightly, but in light of the budget shortfall, that's why we ultimately felt it necessary to propose. We also proposed pulling back roughly 485 million in one time funding that had been allocated in the 2021 and 2022 budgets to support the Learning Aligned Employment Program that represents the balance of available one time resources.

And then we also propose to reduce support remaining support for the Golden State Teacher Grant Program by roughly 6 million 1 time, and that would leave roughly 50 million remaining to support that program.

We proposed some Trailer Bill Language around the Golden State Teacher Grant Program as well to clarify eligibility, add some income requirements, and also to adjust the size of the awards. Then lastly, the 7.95% reduction statewide reduction would apply to the state operations of the California Student Aid Commission.

Thank you Legislative Analyst.

So beginning with the middle class scholarship proposal, this program was one of the state programs that was augmented significantly since 22/23 in comparison to the Cal Grant Program that is more targeted to low income and middle income students. The Middle Class Scholarship Program is less targeted with students that have family incomes, even up to 226,000 eligible for awards in 24/25. And compared to the Cal Grant Program, the Middle Class Scholarship Program is also much newer and more difficult to implement.

That said, almost any reduction you take in the financial aid area is going to have impacts on students. There is some timing issues with this particular proposal and that some UC and CSU campuses have notified students of a preliminary middle class scholarship award for 24/25. Some of them might have made certain decisions about enrollment and work and loans based upon that information. Turning to the Learning Line Employment Program, we recommend you go ahead and adopt this. It gives you substantial budget solution with minimal impact on students.

Since the program is still in an early implementation phase. On the Golden State Teacher Grants, it's come to light just over the last 48 hours that there might not be 5 0 million 1 time support remaining. Maybe about 15 million of that is being used for existing students who have existing awards that are going to be paid out here the next few years. So there's not much one time money left after you take that into account.

We'd recommend against any Trailer Bill Language that would just delay getting whatever pot of money does remain out the door. Just using the existing rules, you might have a little bit more you could take here. There's not clear evidence this is actually increasing the supply of teachers rather than just giving some teacher individuals who otherwise would have become teachers of fiscal benefit. There's also some small pots of money for the Golden State Teacher Grant, and again, one pot is 500,000, the other is 6 million.

But for a statewide program, those are small amounts of money that we think you could redirect just directly to districts rather than having a more complex state level program for such a small amount of money. On the final issue regarding CSAC state ops, we have all the same concerns we have with the overarching state ops proposal when it comes to delegating lots of authority to the Administration, not knowing how those cuts would be implemented, not knowing if they would affect core services that the Department implements, and a concern that potentially some of the solution would erode, leaving you with a problem next year.

And I know you're technically here to answer questions. Is that okay?

Yeah.

Okay, let me ask a couple of questions, and then we'll go to Senator Cortese. And one is on the middle class scholarship. And maybe I should start with the Department of Finance. It says that the - the money is going back to the previous levels before the augmentation, but there have been many more people that have come on. So the average grant level doesn't go back. It goes back to substantially less grant level. Is that your understanding?

Yeah, that would be an accurate understanding of what would occur.

Okay, that is. I'll be diplomatic. That's very unpleasant. That's not where we would want to go, because the implication was, oh, we're going back to pre augmentation. But since there's so many more, as hard as it is to believe we would have average grants that would be substantially below the pre augmentation. I think that's something that needs to be looked at. I thought I'd get that out of the way before asking the Student Aid Commission to describe the impacts to the individual programs.

Of course. Madison Sheffield, California Student Aid Commission. Our estimate is that for the May revision proposal, as of our May Revision estimates of the number of students who would get MCS in 24/25 that a student would get, on average of a $340 award.

And my question was intended also to be broader. It's like the impact of other programs that are within the Student Aid Commission that are in this item as well.

Oh, broader comments on all the proposals.

Yeah, you don't have to go till the end of the evening, but just to give us a flavor of where we could see.

Yeah, we would generally agree with your comments around. It may make sense for the Legislature to consider making the MCS program more targeted, and we can, of course, provide technical assistance in that way to make sure that the award sizes are something more substantial for students. So that would generally be our comment on the MCS program.

And of course, we're very, very happy that the Cal Grant program is maintained for a very important need based aid program here in California for hundreds of thousands of students. And then, of course, we have similar comments to many colleagues have presented today on that. We are looking into the state operations and doing our initial analysis of how potentially 7.95% cut could be, could be operationalized if it were maintained in the final budget act.

Just briefly, the cut we estimate for the California Student Aid Commission in 24/25 would be around 1.8 million, which is actually 300,000 larger than our operating expenses budget, separate from personnel services. We also have a very low vacancy rate of 6% currently, meaning that we have just very, very room, very, very little room to cut. In addition to thinking about the vacancy freeze that has been also proposed by the Governor's Budget. So we are looking for ways to minimize impact to staff and to, of course, to students.

If this proposal were maintained, some examples of cuts that would happen to be made potentially on the operational side would be, you know, participation and travel to student workshops and trainings that we would have to do virtually. And that could be a real impact to students in terms of access to financial aid knowledge and applying. We have IT projects, of course, that were planned that were related to audit findings in recent years that we would have to be delayed for future years, things like that.

And then, of course, because this is across our entire budget and we have a very low vacancy rate, we would have to consider impacts to personnel services that are not desirable, of course, as well. So very, very serious, as other state departments have mentioned today, for how to implement this 7.95% cut.

Okay, thank you very much, Senator Cortese. Okay, then let me make maybe, and just confirm with a Legislative Analyst or maybe the Department of Finance. The issue that seems to have come up a little bit about the Golden State Teacher Program is that there's sort of reduction of money, and so it's unclear when it's going to run out. And is there any better assessment of that? Because this is a program people really depend on that's been really popular and well used.

Yeah, I don't think we have an assessment at this point. We're certainly working with the Commission to look at what those impacts are. I think what came to light really for us is that the projections were based on actual expenditures that did not include encumbrances for awards. And that's sort of what's causing some of the heartburn right now over is the there enough funding to support the program? Would it enable new awards to be made in 24/25? We're certainly assessing all of those impacts right now, but we don't have a specific response beyond that.

Okay.

I think I'd just add that we know that rather than 50 million being available, 35 million is available based upon the best estimates to date. There are some choices before you, though, because even that 35 million that we know exists today could run dry very quickly. So there are some students who have applied for awards. So one decision you'll need to make is if they've already applied, but they haven't been awarded a grant, do you still want to allow them to stay in the mix, or do you just want to say, sorry, this program is gone? Even if you just account for those students who already have done that or might apply over the course of the next month or so, it seems like the money might evaporate.

Student Aid Commission.

Yeah. If I may just add, as we have been raising in legislative hearings and various other settings, we have always believed that the money, the entire 500 million appropriation, would be expended sometime in 24/25. But the rate of increase of this program in terms of interest has been so, so fast because of the eligibility expanding, that it's been really hard to know exactly what month and when exactly. Because we do provide awards and there's lag time between when a student receives an award letter saying you're eligible.

And when the money actually they received the check in hand, there's a big lag time between that. And so we have, it's been, we've been trying to project exactly what day to close off the award. So we're never making a promise to a student that the state can't fulfill. So we projected that would be sometime in early to mid 24/25. So that is still true. But we may have not accounted for kind of all that.

As my colleague from the Department of Finance mentioned, that that would mean that the 50, it would be difficult to honor the 50 million because we have people that in 23/24 still need to be paid out in 24/25. And we also have, as the Legislature in the recent years made it so that students can apply almost a year in advance of receiving an award so that they can make a decision on if they want to go into teaching because of receiving this award. And we have students that are applying right now for 24/25. As my colleagues have mentioned, we'd have to decide what to do with those awards related to the governor's proposal.

And let me just say that it seems like there's, how do you want to characterize it? Just some changing information or changing of understanding of certain information. And I hope this is a subject of discussion in the next few weeks to try to best protect people. Because we're so focused on trying to achieve budget reductions that the shortage of teachers survives this independently. And this has been one of the major things in the middle of that shortage that has been a good incentive. And so I really hope we can continue to figure out how to do that.

And then my other last comment is that we had been focused in the whole student aid world on the FAFSA decision. And I apologize for doing an acronym I can't even define at this point, but I know what it is. And with the deadline put off for acceptances to schools, so people know about FAFSA in the middle of it.

We have thrown this, and there are people that might have made decisions about the middle class scholarship and want to make a decision about going into school, and then it's not just being cut, but the grants are going to be cut significantly over the existing thing if you can figure out how to get in. And that is going to affect decisions that and some of these other programs. And so the cut to the middle class tax, middle class scholarship was brutal and disproportionate. And so I really hope that in the remix of things, we recognize, too, that we can do something there.

And the problem is that by the time we do it, some people will have had to make their decisions about whether or not, and the worst thing that could happen is we figure out how to restore some of it. And people passed up on going into a college because they didn't think it was going to be there. And we have put them in a gross situation by this discussion. So I just hope we can see if we can figure something out. And right now, obvious there's brutal cuts everywhere across the budget, and we're going to have to try to figure out on how some of them, to try to mitigate the impacts.

This is probably one of those. So I would just call that out as we close this discussion. But I appreciate it, and I appreciate you being here and helping us with this. We're going to move to the last issue on the budget, which is issue seven, which is the California State Library.

And I know that it's Chris Ferguson and Jennifer Pacella again, and we do have the State Librarian here who I am certain we'll be anxious to answer questions if we push him.

Nothing would please me more, Senator.

No, it's clearly the librarian's not under oath, so let's start with the Department of Finance and go to the Legislative Analyst.

Sure. Chris Ferguson with the Department of Finance. I'll start with the more technical adjustment, which is that the Governor's Budget, we had proposed to revert roughly 131 million from the Library Infrastructure Grant Program.

As you noted in prior discussions, there was a note that we would adjust this based on what actual grants had been awarded and provided out to local libraries. The May Revision does this. That 131 million is now 4.4 million one-time General Fund.

What was that second number?

4.4 million. So, it's largely been eroded. With that, though I would note three other sort of core adjustments at, well, at the State Library that we proposed. The first being we proposed to reduce support for the Dolly Parton Imagination Library by 4o million one-time. General Fund.

We propose to eliminate ongoing support for the Lunch at the Library program, you know, with the hope being that schools, through expanded learning opportunities programs and other summer programs, may be able to provide meals to students on their campuses. And then lastly to reduce support for the California Library Services Act by roughly 1.75 million ongoing General Fund.

That program provides a discretionary support to local libraries for things like book acquisition, book loans between libraries, items of that criteria. Lastly, I would note that the library would also be subject to the 7.95% statewide reduction.

Legislative Analyst.

So just a few comments here. So, on the Imagination Library, as your agenda notes, even under the May proposal, they leave 28 million of unspent prior year monies for the program.

Because it is one-time money, because you are facing a multi-year budget deficit, we would recommend skipping all remaining funds from that program. For Lunch at the Library, this would eliminate the ongoing program. It was created in 22-23. There has been since that time a substantial increase in school meal opportunities through schools.

This particular program, when the state-funded it, provided two positions. So, as an alternative to doing this unallocated 7.95% reduction where Finance decides somewhere down the line how that cut is taken, the Legislature could take a more strategic approach.

And just if you do decide there are any ongoing programs that you choose as part of your budget balancing package to eliminate, you could sweep associated positions in a more direct way. That's all I think. Thank you.

Great. Then would you like to make any comment, Mister Librarian?

Microphone. Now it's on. Well, I notice on the agenda it says you'd like to hear from us. Do we have any data on current participation at Lunch at the Library? Lunch at the Library was a program, well, you know this, that was created by Holly Mitchell.

It was designed to help feed more hungry poor kids during the summer, of which the Department of Education, which does provide meals for hungry poor kids in the summer, says that there's 2 million kids in California, right, the most awesome state in the richest country on Earth.

There's 2 million kids who qualify for federal free or subsidized meals who go hungry every summer, even with programs where schools conduct meal sites in the summer.

So, the intent of this program was to use the sort of the secret weapon of libraries to help increase both the number of meals that went out and use libraries as the community centers that they are to connect other entities around the community to better coordinate efforts to feed hungry poor kids in the summer.

So, in summer of 2023, 270,000 meals served at 189 libraries. One of the coolest things that Senator Mitchell put in this Bill was an opportunity for micro-grants so that libraries that were too small to feed the kids there or other meal sites operated by other community entities. Right? The libraries would get, I think it's like $1,500.

I mean, we ain't breaking the bank at Monte Carlo, but allowing libraries to come and set up, pop up libraries at these other sites to try and increase usage, right, by parents and caregivers and other families. It's. I'm telling you what you know already, but I mean, the federal program is, it's ridiculously byzantine.

It worked better during the pandemic when all the rules were waived. But I think, like I said, the magic of this program, if you will, is that it involves libraries. And I've been to 56 maybe seven of these Lunch at the Library events around the state.

And almost to a person like the kids walk out of the community room and say, where do we sign up for summer reading? I also recall that there was 125,000 books handed out to kids through this program, separate from all the other free books that libraries hand out. And it turns out I had no idea.

But it's now become the cheapest way to create a strong reader is to give them books to read at home. So, you know, my grandmother would say this is kind of a pennywise and pound-foolish thing.

In addition, we've been advocating to maintain a program, a pilot program that was created, that offers free online, 24/7 live tutoring to any student who wants it in English, Spanish, five languages, five other languages in STEM, and language arts. There's a 1,000,007 kids using 1.7 million hits in the last school year.

And it's a yearly subscription of 3.5 million, which is less than $1 per school kid. And both that program and Lunch at the Library seem to me, you know, they tell you in management and leadership stuff that, okay, what's the most important thing to do right now?

These are programs that are being used that are benefiting hungry, poor kids and helping students do better in school. And if we don't have them, then we go back to the crappy status quo where if you got dough right, you get, you get food and you get the online tutoring.

And both of them are relatively small in comparison to what I've heard for the last hour of the spending that's going on elsewhere in other parts of the education budget. I should stop now before I terminate my, accidentally terminate my career.

You might have already done that, but I appreciate your comments. And it's the first time I think this session the word crappy has been used in front of us. So thank you for doing that.

I didn't quote John Burton just in deference to the comportment of the.

I used one of the seven FCC words on a radio show last Friday morning. I didn't know that was still in effect. But it is for public radio. Yes. I described a certain kind of show that we were in the middle of, he show being the second half of the word I used. I had the 77.

He said, stop right there. And he read a complete statement for the FCCs.

Be careful. We're being streamed here.

That's exactly why I use just the show part of that word.

Internally, right? The 7.8%. I mean, that's, I mean, I get that. That's an across-the-board thing that.

I was going to ask you about that, but I think we're good. You've been quite articulate. The outgoing Senate President pro tem will probably be unhappy that you didn't mention the Dolly Parton part because she was instrumental in that.

Well, the remaining funds. Right? Is it ideal? No, but it's a difficult budget year. I mean, we've heard that over and over again. The remaining funds allow us to significantly grow the program and add more, at least. Right.? We can get up to a half a million kids probably get bought.

You each addressed the questions I was going to ask in your comments, and it's very significant that it went down to 4 million in the grants. Given what we talked about first, that means that most of that was obligated. So are there?

Well, and the 4 million in savings comes from people who we gave the opportunity. We said, hey, look it, you got to turn in your paperwork by December 31. And they didn't. So, it's, from my perspective, it's a self-inflicted wound on those jurisdictions.

And now you've said that in public, and you'll be able to tell them with clarity. I've already told them with clarity. Well, clarity is clearly your guiding star right now.

That's not the word that's often used.

Yes, but that's one of the seven, and we're not going to get into that.

True. God bless you.

Senator Cortese, would you like to rescue us here?

Next week we'll be graduating 15,000 Mckinney Bento kids out of our schools. And that's just the ones that are seniors who are defined by the Federal Government as homeless and, of course, get benefits while they're in school. So the good news is they cross the stage and get the diploma.

The bad news is they step off the stage and they're out of luck. No more benefits. Foster kids. Right. And I'm sure those are some of the folks who are looking for any source of benefits, whether it's, you know, meals at the library or meals at community centers or meals somewhere else.

So, you know, it's heartbreaking to those of us that have been in the process successfully at some level of standing up programs to, to mitigate that historic period of time that hasn't received enough attention. You know, throw this in the mix.

If there's a way for us to mitigate this particular cut somehow or figure something out, certainly that should be done, given the vulnerability and the real pain that it's going to cause.

I think during the entire budget process, we use the term pain pretty loosely because there's pain for us, there's pain for those who work here in General in the overall state system one way or the other. And then there's this sort of real pain that occurs when meals are cut for youth or older adults, for example.

We've seen that in past budgetary crises. It's that kind of pain that there really isn't a way to mitigate other than to just replace the resources as quickly as you possibly can. So, anyway, I appreciate the testimony, and I'll be one to try to help do our best to figure a work around. Thank you, Senator.

Thank you very much. And I think those are very eloquent closing remarks, and we have made our position clear. We thank everybody for the work that they might do in trying to deal with what we've brought up. So thank you for being here today. We really appreciate it. That completes our consideration of the issues in part b.

Let me take a survey here by hand of who would like to speak in public. Comment 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22.

We're going to do this and we're going to try to limit you to 45 seconds because I'm dividing it by the amount of time we have left in the hearing. If you would please come to the podium.

Senator Cortese said if there's more speakers and the time is running, he would be happy to preside for the last speakers. So if you're willing to do that, I'm willing to change it to a minute because I will probably have to walk out of here in 10 to 15 minutes, and then Senator Cortese can continue.

So give us your name, your organization, and your position on any of these items.

Good afternoon. My name is Cody Van Felden. I'm representing John Burton Advocates for Youth. I'm also here as a former foster youth and a student who did qualify for the Cal G rant, but many of my peers do not.

So I urge the Committee to adopt the phased in approach to the Cal grant reform proposed by the Cal Grant Reform Coalition to make this accessible to more foster youth like myself. Thank you.

Thank you very much. We appreciate your comments.

Good afternoon. Jessica Sacco, on behalf of Children Now ditto the previous speaker's comments and also in opposition to the proposed cuts to the Golden State teacher grant program. For the reasons that were articulated earlier by the Committee. This is a successful program.

We are struggling to recruit enough teachers, and this is a decision point factor when potential candidates are making a decision on whether or not to pursue a career in teaching or not so fundamentally oppose the cuts to that program.

Thank you very much. Appreciate your comments. Welcome.

Kimberly Rosenberger with SEIU. We are appreciative of trying to make schools whole in K through 12. However, by piecemealing, certain protections go away, especially those with a classified and certificated workforce. With late layoffs, we would encourage guardrails to ensure that while we encourage stability in K-12, we maintain the workforce that serves those students.

Also on CSU, the commitment to the compact is important to us, but we also want to make sure that those labor contracts and the progress to address inequities aren't impacted by the funding mechanisms.

And then finally, we have real concerns about the small budget that it takes to Fund those UC labor centers being cut when the impact and value of those UC labor centers are monumental. So we would discourage that cut. Thank you.

Thank you very much. Appreciate your comments. Welcome.

Good morning. I'm Jacqueline Perez. I'm an academic worker at UCLA and the Member of the Executive board of United Autoworkers Local 4811. My union, the largest labor union at the University of California system, is opposed to the third $13 million budget cuts to the labor center's research and education at the UC.

UAW represents the vast majority of people who work in the UC labor centers, including graduate student, post doctoral and career researchers, many of whom are my colleagues.

Our Members do the research that California needs to protect workers on the job, promote equitable past for black workers, undocumented workers, female workers to get good jobs, and develop plans to transition workers to green jobs to help California meet its climate goals.

Some of this work is tackling big business monopolies such as Uber and Lyft, pricing out independent taxi workers, undercutting wages and driving them into poverty, or on how thousands of united food and commercial workers who work in meatpacking plants had their job titles arbitrarily changed by their employer and were cut access to union guaranteed Healthcare, sick time and other critical protections.

The state has made an important investment to expand the work of the labor centers across the state, but this investment will be wasted if the state chooses cut funding now. We urge you not to cut this vital program and fully Fund the UC labor center so UAW Members can get back to work.

Thank you very much. Welcome. Welcome. My name is Ken Jacobs. I work as co-chair of the UC Berkeley Labor Center and I'm here as an individual to express my concern about the proposed cuts of the $13 million to the UC labor centers.

As Senator Cortese noted, the labor centers provide vital research and analysis that informs policies about the California workforce, and cutting these funds would deprive the state Legislature with important research, and not just the Legislature and beyond with important research and rigorous data to make informed policy decisions that affect our workforce going into the future on important issues like the changing of climate and green jobs, AI and technology, the future of the direct care workforce.

So we hope you will maintain those funds. Thanks. Thank you very much. Appreciate your comments. Welcome.

Good afternoon. Alexis Manzanilla, I'm an academic researcher at the UC Berkeley Labor Center and Member of UAW 4811 at the UC Berkeley Labor Center Center.

Academic researchers like myself do research on important policy issues such as expanding health coverage regardless of immigration status, how workers can have a voice in technological changes in their workplace, and developing workforce standards and strategies needed to help California transition to a clean economy.

At the UC Berkeley Occupational Health Program, academic researchers lead worker education related to their health and safety rights.

Not only am I concerned that these cuts could potentially lead to my fellow union Members losing their jobs, but that they will impede state supported research that can advance California labor standards and public policies that support an economy for all. I urge you to oppose these cuts. Thank you so much.

Thank you very much. Welcome.

Hello. My name is Ana Padilla and I'm the Executive Director of the UC Merced Community and Labor Center.

I'm here as an individual to express my concern with the May revise proposed budget cuts to the UC labor centers ongoing funds for decades, UC labor centers have played a leading role in producing world class research and public education that has informed major policies in California and across the country.

At the intersection of work and immigration, Healthcare, shifting industries, climate change and public disasters. The proposed budget cuts would have a disastrous impact on policymaking for those furthest on the margins, and it would eliminate the state's only applied research center in the Central Valley, one of the most economically and environmentally disadvantaged regions in the nation.

We propose that the UC labor center's annual ongoing allocation not be cut. Thank you.

Thank you very much. Welcome.

Hi, good afternoon. Jana Somali with AFSCME California. Ditto the comments that SEIU made on K-12 funding. Also, we oppose issue two, we oppose the elimination of funding for UC labor centers. And thank you, Senator Cortese, for your comments on on its importance to the state and to workers across the state.

Also, we support issue five, funding for California community college nursing programs. Thank you very much.

Thank you very much. Welcome.

Good afternoon. Mary Washington on behalf of the Cal State Student Association, which represents the nearly half a million CSU students across the state, I'm joined by our partners at NextGen policy in California Competes, as well as the Cal Grant Reform Coalition to say that we ask that you maintain the commitment made in the 2022 budget to enact Cal grant reform to ensure that over 130,000 new students will have the financial means to obtain a higher education.

Our request is that the Legislature initiates Cal grant reform this year through a one time investment that implements key structural and eligibility changes using the 60 million savings from the January budgets, increased Cal grant spending.

Finally, on behalf of CSSA, we also ask that you continue to support students and their success by maintaining the governor's compact and do not cut funding to the CSU. Thank you.

Thank you very much. Welcome.

Thank you, Mister chair and Senator Cortese. Jonathan Lightman on behalf of the Community College League of California, we want to thank the Administration for their support for community colleges reflected in the May revise, particularly by the increased COLA and maintaining the one time funds for nursing for the reasons shared by the chancellor's office.

We look forward to working with you and the Administration as we conclude this budget process and hope to find a way forward with a phased in approach for Cal grant reform, perhaps along the lines described by the John Burton advocates for foster youth. Thank you. Thank you very much.

Hi, Tiffany Mock on behalf of CFD, a union of educators and classified professionals. Thank you so much for this hearing. We oppose the cuts to the UC Labor Center, the proposed reduction to the UC based funding for 2526 and the proposed Proposition 98 maneuver.

We are further reviewing positions on other items at this time, but to leave on a positive note, we support the application of the statutory COLA to the community college segments in the adult education categorial, and we look forward to discussions to prevent further pink slipping of our education staff. Thank you so much.

Thank you very much. Welcome.

Thank you and good afternoon, Mister Chair. Malik Bynum with UDW AFSCME Local 3930, representing over 171,000 IHSS and child care providers across the state here in solidarity with our UC Labor center partners to reject the administration's proposal to pull back funding for expanded labor research and service across the University of California.

The labor center has always been a pivotal resource, providing analysis and counsel to legislators and labor advocates alike in ways that many other resources cannot. That I respectfully urge the Committee to reject this proposal. Thank you. Welcome.

Hi, Kelly Burns from the California Faculty Association. Thank you, of course, for your commitment to Public ED, Higher ED. We ask that you continue to support the compact and the commitment to our students and faculty. We also ask that you make sure to honor the very hard fought labor contracts and progress that we have made.

Additionally, we echo the comments to protect the UC Labor Centers that are so central to California.

Thank you very much. Welcome.

Neil Sweeney, a Member of UAW 40811 the union of 48,000 academic workers at the University of California. I've served as President for many years, and I'm here, along with many of my colleagues, to oppose the elimination of funding for labor centers. They provide very valuable policy analysis.

I've seen many of my colleagues who work at the labor centers testify at hearings in this building and at the Capitol just in the past weeks, and they have provided analysis from many different agencies, including the Department of Labor Standards Enforcement, Workforce Development Agency, Agricultural Labor Board, and division of Occupational Health and Safety.

And one of your colleagues, of course, Senator Lola Cuevas, worked for many years at the black workers center and did a lot of very valuable work there. I'd encourage you to talk to her more about why this is such an important founding. Thank you.

I'm not supposed to speak in response, but believe me, she's talked to us.

Hi, I'm Ed Flores, Faculty Director of the UC Merced Community and Labor Center. I'm here to express my concern with proposed budget cuts to the UC Labor Center's ongoing funding. The proposed budget cuts would have a disastrous impact on policymaking, particularly for those in rural regions and those furthest on the margins.

In the past year, we released a study that informed a federal $65 million initiative to stabilize and protect agricultural jobs, of which California had the most applications.

Also last year, following epic flood disasters, we conducted an unprecedented evidence based study on unmet need that led to $40 million in aid for two California communities in rural areas, and we created a research toolkit for future disasters.

Each of those two studies included current and former UC Mercedes students who wrote Latino and were previously undocumented and found the policy research life changing.

We asked the state not cut labor center funding, which is so critical for the state's efforts to compete for hundreds of millions of dollars in federal economic resources to protect workers that power the world's fifth largest economy, and to educate students who are our future policymakers. Thank you.

Thank you very much. Welcome.

Good afternoon. Chair and Members. Mikayla Hutchinson on behalf of the Student Senate for California Community Colleges, representing all 2 million community college students, we deeply appreciate the efforts to retain adequate funding for the community colleges, even in a deficit year. However, we are disappointed the Governor did not trigger the funding mechanism for the Cal grant Reform act.

To move Cal Grant Reform forward, we encourage the Legislature to implement key structural and eligibility changes to the Cal Grant program this year. This phased in approach allows the state to meet its budget goals while maintaining its two year promise to students and building up our economy and workforce of the future.

Thank you for recognizing the value of California's community colleges and its students.

Thank you very much. Welcome.

Hi. Chair and Senator Cortese. Anna Matthews, on behalf of Mesa Math Engineering Science Achievement with the California Community Colleges, we're grateful for the COLA and are hoping for an extension of the COLA to other categorical programs.

We appreciate the Legislature's commitment to Mesa and are requesting amendments to existing budget language to expedite funding distribution and create more stability for our programs.

In their support of our most marginalized community college students, we would hope that funds would not be swept and we hope that the Legislature will help us to make sure that the money that the state has provided us makes its way over to our local programs. Thank you.

Thank you very much. Welcome.

Good afternoon, Senators. Thank you so much. My name is Saba Wahid. I'm the Director of the UCLA Labor Center here as an individual to express my concerns around the funding cuts to the nine UC Labor Centers and the UCLA Latina futures lab and why we were targeted over other centers.

Given our value add and close work with the working class communities, we have a template here for the entire country about how to push the public, how exactly public universities can invest in projects that support the public good and serve the local communities. Let's not roll back this important resource. Thank you.

Thank you very much. Welcome.

Good afternoon. Chair and Senator Cortese. Heather Calomese with ED Voice.

I'm here to express our opposition to the governor's 20242025 may revision budget proposal that reduces the $60 million in one time support for the Golden State teacher grant program, as well as making significant changes to the program, including reducing the grant award to $10,000 and also reducing the requirement from teaching a priority school from four to two years, which would decrease the incentive to work in a priority school.

In addition, the Student Aid Commission would have to make a number of changes to the program which could lead to significant implementation changes. With funding set to run out, there is no need to make significant changes to a program that is working at this point in its tenure.

We strongly encourage you to protect the investments and to preserve the impact of the GSTG program by maintaining the remaining funding in the program and also maintaining the program's current statutory language. Thank you.

Thank you very much. Welcome.

Good afternoon. Michelle McAnderwood on behalf of the Coalition for Adequate Funding for Special Education, we are here to oppose two new proposals in the May revision related to our earliest learners with disabilities. So these are preschoolers age zero to five and their inclusive setting.

The first proposal that we oppose is governors stopping the set aside of slots for preschoolers with disabilities at the current 5%. It is important for these children to be with their typical peers in preschool. Second, we oppose the expansion of funding for zero emission buses coming at the expense of inclusive settings for preschoolers.

Just last month, LEA submitted funding applications for the inclusive Early Education Expansion Program. Again, this is to provide more inclusive settings, which is both a smart investment and a moral imperative for California to do. Thank you.

Thank you very much. Welcome.

Hello. My name is Jason Whistler. I am the senior research specialist at the UC Davis Labor Center. I'm here as an individual to speak in opposition to the cuts to the labor centers. Public higher education must be for all of the public and not just research and training for the privileged or corporate interests.

The labor centers provide effective research, teaching and services that support working people throughout the state. I'm new to California. I previously worked on a dissertation at the University of Iowa on working class conservatism. I also worked at Iowa's labor center.

I watched as Iowa Republicans attacked the labor center, then public employees, and most recently public K-12 education. One of the reasons I moved to California is that I expected it to be different with democratic majorities.

Based on my research on working class conservatism and my experience in Iowa, when DEMs fail to support working people, it opens up what should be a solid base of two way support to the culture war wedge issues exploited by the other party.

This includes anti intellectualism embedded in a belief that higher ED does not address their issues unless, to make them worse. The labor centers help alleviate that and must not face this funding cut. Thank you. Thank you.

Just before my very vociferous former staffer steps to the microphone, let me just say I apologize that I have to leave.

I'm going to turn the gavel over to Senator Cortese, and I want to remind everyone that if you were listening and you didn't get to submit comments or this was too brief for what you really wanted to say, we welcome your comments either care of our website, the Budget Committee and Subcommitee one, or by letter directly to the address that's on that website.

So we appreciate your comments and I appreciate Senator Cortese for taking the last ceremony

I'm going to squeeze in here. I am Veronica Tedriquez. I direct the Chicano Studies Research center at UCLA. I'm here as an individual and also as a resident of Santa Cruz. So thank you.

And it was a former resident of Santa Cruz that just deferred to you, so keep going. I have to go.

So I am here to speak in favor of the labor centers and also to register that the governors may revise. Proposes pullbacks to 13.7 million for the Latino Policy and Politics Institute, which is funding for the Latina Futures 2050 lab. This lab involves UC Santa Cruz, UC Merced, UCLA, UC's, and additionally some CSUs.

We're supporting researchers to conduct community engaged work that informs policy aimed at improving equity and inclusion for latinas, particularly around issues of health equity, around increasing the pipeline of Latina teachers and the retention of Latina teachers.

We're addressing the pay gap, we're addressing LGBTQ issues, and it's really exciting work that aims to impact the plurality of women in California.

The majority of mothers in the state are Latina, 78% of child care workers are Latina, and so this has implications for the children of our state, and we hope that you maintain the funding for this Latina Futures lab listed under Latino policy and Politics.

Thank you very much for your comments. I look forward to seeing you down there. I'm going to turn the gavel over to Senator Cortese, next speaker, of course.

Thank you, Senator Cortese. Chris Reefe, on behalf of the California School Boards Association, first want to associate ourselves with the comments made by my colleague on behalf of the Coalition for Adequate Special Education Funding. We are also opposed to the shifting of the inclusionary preschool funding to Fund the expansion of the electric school bus program.

Specifically, though, we want to make sure that we emphasize that we are stridently opposed to the governor's Prop 98 maneuver.

We think, we believe it runs counter to the spirit, purpose, and constitutionality of Proposition 98 and strongly encourage the Legislature to look at the existing statutory and constitutional authority that it has to be able to address public education funding. Thank you. Thank you.

Hello, my name is Sofía Cárdenas. I'm here on behalf of the Sacramento Central Labor Council, representing 200,000 union families here in the capital region. I'm also here in solidarity to discourage budget cuts for the UC labor centers.

My reason is we took in two young college students last summer as labor summer internships working with the UC Davis Labor center. We've developed both of those interns into effective leaders in their communities. And so I ask you to please not cut this funding and don't deny kids the right to be leaders in their community. Thank you.

Thank you. Next speaker.

Hi, I'm Leticia Saucedo I'm a law Professor at UC Davis and I'm also the CO-Director of the UC Davis Labor and Community Center. I'm here to express my concern over the budget cuts to the UC labor centers. They're important because they provide vital research and analysis that informs policies impacting all of California.

From minimum wage income tax credits to undocumented workers, the centers have been instrumental in developing evidence based solutions that uplift working families across the state. And cutting this funding would deprive policymakers of rigorous impartial data that they need to craft sound labor and economic policies. As a Latina, I'm also here to support the Latina Futures lab.

And as a Member of the fast, one of the fastest growing populations in California, I think it's really important that we continue to support that kind of work. Thank you.

Next speaker.

Good morning, Senator Cortese. Tia Koonse with the UCLA Labor Center, also here. In opposition to the proposed cuts, I won't belabor the point, but you know us, you love us. We're here all the time because we provide expert testimony. We provide the data that you need to do your job.

And as we head into the future, certainly we need all nine UC campuses to be able to provide this kind of support and infrastructure around the whole state. Thank you so much.

Thank you. Next.

Good afternoon. Katie Hardman with the California Teachers Association. The CTA continues to oppose the governor's approach to Prop 98 funding. The May revision proposes an unconstitutional reduction to Prop 98 that will lower school funding this year and for years to come.

The state has made significant progress in the recent years around school funding, and this proposal will take school funding backwards. So we urge you to adopt a budget that's consistent with the constitution and protects long term education funding. Thanks.

Thank you. Next.

Hi, good afternoon. Carol Gonzalez here on behalf of Long Beach City College, Hispanics organizer for Political Equality and AD Trust West, who are Members of the Cal Grant Reform Coalition here. We understand the budget circumstances. However, we believe it's important to prioritize college affordability of adult learners, working parents and Low income students.

Therefore, we urge the Legislature to take a phased in approach towards implementing Cal grant reform by implementing key structural and eligibility changes using the 60 million savings from the January budget increase of Cal grant spending as a foundation for this one time investment.

We also want to urge the Legislature and Governor. We want to Thank the Governor and the Legislature for protecting community college funding.

Long Beach is especially appreciative of the nursing program funding and Ed Trust West also wants to respectfully ask for more specificity on the funding that the CSU and UC compacts will actually receive and clarify what future out years will actually look like.

We'd like to ensure the protection and investment in programs designed to advance student access and success and close racial equity gaps. Thank you so much.

Thank you. Next. Good afternoon. Christopher Sanchez with the Mesa Verde Group here. On behalf of CAR Essen, the Central American Resource Center, and Immigrant Legal defense, we would like to bring to the Committee's attention an issue that overlaps with sub three in this house and the governor's January budget and included in the May revise.

He's cutting immigration legal services that are provided at the CSU, cutting 5.2 million of those dollars, which is over 70% of the funding that's currently offered. Organizations are opposed to these cuts because of the tremendous impact that it has to students, faculty and staff at those campuses in the General community.

We firmly believe the timing is off for these cuts, especially with the Trump Administration possibly coming next year. This item has been heard in Assembly sub three and in sub two.

We would just urge this Committee to align its actions with the other three committees that have already heard this and would also urge you to reject the governor's proposed cuts and fully Fund immigration legal services. Thank you. Next.

Good afternoon. My name is Euni Linden, with Public Advocates. We oppose cuts to the Golden State Teachers grant program, which is essential to recruiting diverse teachers, which studies show leads to improved outcomes for students of color.

In lieu of cuts, we believe it's important to consider new revenue options that are more stable than capital gains, such as taxing services or wealthy estates, or tweaking Prop 13. And we agree on the need for an education bond this year.

But as we requested in a recent letter to state officials, the Legislature and Administration must first fix the regressive and unconstitutional structure of our public school capital finance system.

Under the current allocation scheme, the state's 60% contribution for all district modernization projects has sent twice as much per pupil to those in the wealthiest districts as the poorest districts.

Now is the time to fix this unlawful 25 year denial of equal educational opportunity in our school capital finance system, and we can do that by employing an equitable sliding scale, much like the systems for funding school operations. Thank you for your time.

Thank you. Next.

Good afternoon. Paige Clark with the National Center for Youth Law. I want to thank you, Senator, for your earlier comments regarding California students experiencing homelessness. We are respectfully asking the Legislature to maintain the proposed $2.5 million in federal funding for homeless education technical assistance centers outlined in the governor's May revise.

These centers provide critical guidance and resources to county offices of education to better serve their students experiencing homelessness. Thank you.

Thank you.

Good afternoon, Senator Cortese. First, Thank you for sticking around trooping it out. David Nevin on behalf of the Institute for College Access and Success, we're very grateful to the Governor and the Legislature for not making significant cuts to the Cal Grant Program in the May revise as well as in early budget action.

We are a little disappointed to see that the Cal Grant Reform was not implemented in the or was not exercised in the Governor's Budget or may revise.

We're hoping that the Legislature can find a way to create this piecemeal or phased in approach, especially using what is proposed for the $60 million in cuts that my colleagues from the Cal Grant Reform Coalition spoke to earlier.

We're also hoping that the Legislature can support the continued investment for the CCGI and the Trailer Bill modifications for the cradle to career data system, and we do have to uplift the structural funding deficit faced by the Bureau for Private Post-secondary Education.

The bureau does need additional revenue to carry out its critical mission to protect students and oversee institutions that eventually become predatory and end up costing students a lot of money and time in their higher education.

And then just really briefly on behalf of Cerritos College, we do remain concerned about the current lease revenue bond for student housing proposal.

Our college was ranked number one by the chancellor's office last year in last year's budget process as being the most cost effective and shovel ready program and project for getting unhoused students into affordable student housing as quickly as possible. Our project is shovel ready. Ready to go, on the campus grounds.

All we need is just a little bit of help from the Legislature to push us in the right direction.

Thank you for your testimony, and we're happy we were able to get everybody on the record who want to be on the record today with public comment. Thank you to all the individuals who participated.

If you're not able to testify, if you were not able to testify today, please submit your comments or suggestions in writing to the budget and fiscal review Committee or visit our website. Your comments and suggestions are important to us. Thank you, and we truly appreciate your participation. We've concluded the agenda for today's hearing.

The Senate budget Subcommitee, number one on education is adjourned.